Axis Bank Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from Axis Bank Ltd (AXISBANK) Q4 FY24 Earnings Concall

• Deposit Franchise Strengthening
  • Focused on improving deposit quality and strength over the past couple of years.
  • Initiatives like Burgundy, Burgundy Private, Siddhi, and Sparsh helped improve deposit health.
  • LCR outflow rates improved by 500 bps in last two years.
  • CASA ratio at 32% of average assets in Q4 FY24, among the best in the sector.
  • Higher growth in retail and small business deposits at 18% YoY.
• Growth in Focus Segments
  • Focus segments like SME, mid-corporate, SBB, rural personal loans, credit cards grew at 25% CAGR in 4 years.
  • These segments now constitute 43% of total advances, up 1210 bps from earlier.
  • Delivered growth across businesses while maintaining capital efficiency.
  • Fee profile among the best in the industry, with 93% granular fee.
• Digital Banking Initiatives
  • Open by Axis balance sheet saw 33% growth in deposits, 74% in loans.
  • Highest-rated mobile banking app on Google Play Store and App Store.
  • Launched multilingual support for mobile app and internet banking.
  • NEO for Business has 60,000 MSME customers onboarded in two quarters.
  • NEO for Corporates scaling up to become operational bank of choice.
• Bharat Banking Performance
  • Bharat Banking disbursements up 30% YoY.
  • Rural advances up 30% YoY, deposits from Bharat branches up 12%.
  • Expanded multi-product distribution architecture to 2,482 branches and 64,550 CSC VLE network.
  • Contributed significantly to overall PSL achievement at 46.37% for FY24.
• Citi Consumer Business Integration
  • Integration remains on track, with deposits largely stable.
  • Growth in retail assets and wealth management, improvement in cross-sell metrics.
  • Live with first phase of migration journey for transitioning customer base.
  • Successfully completed migration of CVCE loans portfolio in March 2024.
• Capital and Liquidity Position
  • CET1 ratio at 13.74%, improved 3 bps QoQ and 44 bps for FY24 organically.
  • Regulatory changes adversely impacted CET1 by 72 bps in FY24.
  • Prudent COVID provisions of INR 5,012 crores reclassified, not utilized.
  • Average LCR ratio at 120%, improved 171 bps QoQ.
  • No need for equity capital raise for growth or protection.
• Loan Book Growth
  • Loan book grew 15% YoY and 4% QoQ.
  • Retail loans grew 20% YoY and 7% QoQ, constituting 60% of advances.
  • Wholesale banking loan book grew 10% YoY, flat QoQ.
  • Commercial banking book grew 17% YoY and 5% QoQ.
• Asset Quality Trends
  • GNPA at 1.43%, down 59 bps YoY and 15 bps QoQ.
  • NNPA at 0.31%, down 8 bps YoY and 5 bps QoQ.
  • Gross slippages declined 7% QoQ to INR 3,471 crores.
  • Recoveries from written-off accounts at INR 919 crores in Q4.
• Subsidiaries’ Performance
  • Domestic subsidiaries’ net profit grew 23% YoY to INR 1,591 crores.
  • Axis Finance AUM grew 38% YoY, PAT up 28% to INR 610 crores.
  • Concept of customer advances reducing as supply chain eases.
  • Axis AMC AUM grew 14% YoY, PAT up to INR 414 crores.
  • Axis Securities broking revenues grew 58% YoY, PAT up 48% to INR 301 crores.
• Loan/Deposit Growth
  • Aim is to maintain loan-to-deposit ratio within a certain range to support growth.
  • Deposit growth is important for driving future credit growth.
  • Margin expansion potential as higher-margin orders get executed.
  • Significant improvement in deposit quality over the past few years.
  • Focused on growing retail, corporate, and government deposits through various initiatives.
• Net Interest Margin
  • NIM improvement was due to disciplined execution, book remix, and pricing improvements.
  • No one-off factors contributed to the higher-than-expected NIM performance.
  • Management aims to maintain or improve NIMs by utilizing available levers.
• Fee Income
  • Third-party fee income saw strong quarter-on-quarter growth.
  • Indicative of new, higher level of fee income going forward.
• Loan Growth Strategy
  • Focus on growing higher RAROC (risk-adjusted return on capital) asset classes.
  • Mortgage growth was lower due to lower RAROC compared to other retail segments.
  • Strategy allows flexibility to grow different asset classes based on economics and liquidity.
• Medium-term Loan Growth Guidance
  • Aim to grow 300-400 bps faster than industry over medium to long-term, 3-5 years.
  • Near-term growth aligned with deposit growth of ~13% expected for the industry.
• Credit Card Portfolio
  • Credit card spends moved in line with cyclical patterns, not a slowdown.
  • Lower outstanding balances due to declining revolve rates (customers paying down more).
  • Continued strong pace of new card acquisitions at 1.28 million in the quarter.
  • Asset quality remains within guardrails, with dynamic policy changes based on risk assessment.
• Capital Raising Plan
  • Rationale is to assess capital position for growth and protection, not an immediate need.
  • Bank reiterated it does not need capital for either growth or protection pillars currently.
  • Enabling resolution sought purely for financial flexibility.
• Fee Income Ratio
  • Core fee (retail fee) to assets ratio has improved from 1.1% to 1.35%.
  • Bank operates at higher fee to assets ratio than equivalent private peers.
  • No further significant optimization expected in fee to assets ratio going forward.